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Higher-Education Disclosure, in Theory and Practice

Earlier this week Education Sector and AEI co-published a report on higher education disclosure. In a nutshell, colleges are required to report and disclose certain kinds of information to the federal government and prospective students, in exchange for which colleges receives billions of dollars in public subsidies through the federal student financial-aid system. It’s a pretty good deal, and yet we found that the majority of all four-year colleges sampled were failing to disclose information like the percentage of low-income student who graduate, despite the fact that they are legally required to do so.

Given that low-income students often struggle to graduate, this is crucial information. Yet most colleges responded to our request for information with some variant of “We don’t have to tell you,” “We don’t have that information,” or “Why do you want to know?” The U.S. Department of Education is responsible for enforcing this law, but is failing to do so.

The Chronicle wrote a story about the report in which a spokesman for the U.S. Department of Education responded as follows:

“We’re committed to protecting students and taxpayers and have worked to better arm consumers with the information they need—like college costs, graduation rates, job placement rates and debt burden—so that they can make smart educational choices.” [He] added that if an institution ignores the obligations it could face sanctions and potentially lose access to federal funds under Title IV, the section of the Higher Education Act that governs student aid.

That’s true. Institutions that ignore their legal obligations could face sanctions and lose access to federal funds, if the U.S. Department of Education enforced the law in question. But it isn’t enforcing that law. So it’s odd for the U.S. Department of Education to say this as a way of responding to the problem, as if it’s speaking from some kind of observational remove. It’s like a police officer standing in front of a department store being stripped bare by looters reassuring the store owner that there’s no reason to worry because looting is against the law.

Beyond the specific issue of law-breaking, the report findings illustrate a larger problem with the way higher-education public policy is being developed these days. Essentially we have a lightly regulated industry with a number of severe and growing problems—out-of-control prices, stagnant graduation rates, and suspect quality, to name a few. Nobody wants to impose some kind of heavy-handed new federal regulatory regime to solve these problems. It would be politically difficult to enact and probably wouldn’t work very well. But lawmakers don’t want to do nothing—or don’t want to be seen as doing nothing. So the compromise, invariably, is transparency. Unlike in K-12 education, higher education is a market and students are adults. Give them more information, the theory goes, and they’ll make choices accordingly. The market will hold colleges accountable rather than the government.

It’s a good theory and one I subscribe to. But it’s highly dependent on the quality of the information. So when Congress passes a law requiring disclosure of information about important things, colleges don’t comply, and the U.S. Department of Education turns a blind eye, it’s actually worse than doing nothing at all, because lawmakers think they’ve done something to solve these problems, and are thus less motivated to do anything else to solve these problems.